Trump win would be ‘bigger than Brexit’: Westpac

A Trump victory would have larger global ramifications than Britain’s split from Europe, Westpac warns.

A Trump presidency would bring about the biggest changes in many decades in existing US arrangements, says Westpac.

With one week remaining before the year’s most anticipated political event – the US presidential election – Westpac says the outcome will be a bigger deal than Brexit, which rocked global markets in June.

“We believe a Trump win has larger long-term global ramifications than Brexit,” Westpac economists and strategists David Goodman, Richard Franulovich and Sean Callow said.

The possibility of a Trump win has recently become worryingly real for global markets, with the FBI’s decision to reopen Hillary Clinton’s email server case seeing swing voters move in favour of the Republican candidate.

According to a recent Washington Post and ABC News tracking poll, Trump has the support of 46 per cent of voters compared with Clinton’s 45 per cent. No US president has come from as far behind in the polls as Donald Trump was to win an election.

“A Trump presidency would bring about the biggest changes in many decades in existing US arrangements on everything from taxation policy, to trade policy, social spending, immigration and geopolitics.”

“Longer term, our baseline view is that a Clinton win would be more supportive for both immediate and long-run US growth prospects and thus also equity markets,” Westpac added.

A Clinton win also implied higher US bond yields, including for the Fed funds rate.

“The US dollar is likely to be higher in 2017 under a Clinton administration but should slip back near term against the likes of the Australian, New Zealand and Canadian dollars in response to a relief rally in risk assets. An aggressively protectionist trade policy is a key factor in our expectation that a Trump win would produce greater volatility and a weaker US dollar.”

Wall Street weakened 0.7 per cent overnight as a spike in the volatility index saw investors head for the perceived stability of gold and bonds.

That weakness filtered through to the Australian market, which last traded 1.2 per cent weaker and is looking to close below the much-watched 200-day moving average, which could trigger further selling.